dominated the final leg of trump's tour. prime minister may's leadership is questioned. another painful session for sterling. ge's new ceo cut its dividend for the second time since the great depression. from new york city, good morning. this is "bloomberg daybreak." i am jonathan ferro, alongside david westin. alix steel is off today. features just a little softer after the first week of losses on the s&p 500 in some two months. against theker dollar. the pound is a whole lot weaker against the dollar this morning as well. 1.1651 on euro-dollar. treasury yields continuing the flattening theme. get some want to headlines now from outside the business world here for that, we

turn to emma chandra. donald trumpla, and philippines leader rodrigo duterte have bonded over their like of warmer president obama. duterte'scording to spokesperson. trump said he had a great relationship with duterte. in alabama, allegations of sexual in propriety appeared to have an impact on republican senate candidate roy moore. for the first time, he has fallen behind in polling for next month's special election. jonestrails democrat doug 46 to 42. a deadly earthquake has struck the iran-iraq border region. the quake had a magnitude of 7.3. it is a rural, mountainous area where people rely on farming to make a living. global news 24 hours a day,

powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. david: trump is winding up his asia tour, with much talk on the president about fair and reciprocal trade. how did china and other countries he visited respond? our whitespond is house correspondent. where do we end up in the end? >> here is where we end up. trump a month ago said he would not participate in the tpp. over the weekend, 11 other countries in the tpp said they are planning to go forward with some modified version of it. tough on it,ed talks shifting to a bilateral relationship between the countries. are some stats that support why the u.s. may be in a better position to pursue that.

but essentially, if you look at trade as part of a geopolitical strategy for the u.s. to play a leadership role in asia and counter, or check, china's role, this was not an obvious win for the president. the country's going forward with their efforts to do their own tpp without the u.s. in it, or perhaps pressure the u.s. back in it. that sounds the way climate change worked out with paris. and president xi of china thinks globalization is here to stay. david: we have taxes out front and center this week. tell us what to expect out of tax reform? margaret: there is a big standoff brewing between the republican controlled house and republican-controlled senate, at least in terms of leadership and the way these plans look at this point. one of the big divisions you will hear people talking about is the state and local tax.

how much to allow for property tax productions to remain in. the senate once it all out -- the senate wants it all out. the house ways and means committee says no way. the senate begins its work today in the committee process. the house looking for a vote as soon as thursday on the floor. and in the senate, a couple days after thanksgiving. david: they set themselves and awfully rigorous timetable. are we going to make it? are we going to be in conference by thanksgiving? margaret: that is obviously what they want, because they want something by the end of the year. the problem is on the senate side here the problem is the gop conference can only lose two democrats managed to remain united against supporting this. you already have three members

on the republican side in the senate raising major concerns about this. there are others who have not been as vocal. two of those members, bob corker and jeff flake, have nothing to lose. they have shown their willingness to push back against deficit spending they do not think can be justified. it is tight in the senate right now. david: thanks very much. margaret talev. jonathan: and eight week stock rally ending. the s&p 500 to the its first week of losses as concerns mount about tax cuts. joining us is david kelly, jpmorgan chief global strategist. the house and senate seemingly on a collision course. we will see a lot of volatility in d.c. will we see a pickup on wall street? david k.: given how low

volatility is, it will probably pick up anyway. if you look at tax form's timeline, we are well on track. get people say will not this done by 2018, but i think the senate and the house will pass a bill. they assume they will come together in conference and trash that. i assume they will. unlike health care reform, where there is no way to get rid of the mandate and give insurance to everybody -- those things cannot be done in a private sector system -- in tax reform, you have given yourself a $1.5 trillion credit card. all you have to do is figure out who gets to spend what. but nobody wants to just ditch the card altogether. they will find a way to deliver tax cuts to their constituents. they will get it done. so i do not inc. that is the reason for volatility. but this has been a long time for market correction.

we are due. jonathan: if you follow what the senate is doing, what is the timeline? because the senate has a tighter margin, so whatever they agree on, they will push to the house? >> there is not that much difference from an economic perspective. we will get a big cut of the tax -- of the corporate tax rate. we will get some form of repatriation. all of this should help investing, somewhat. we will get broader tax cuts for lower and middle income households in america. that is a big deal. it does add to the deficit. there is a real question about whether you should do that at a 4.1 unemployment rate. i do not think there is that much defense between these versions as people seem to be saying. upid: so how is this showing in respect to the dollar and the fx market? and what does that tell us about the tax debate? jordan: it has been showing up.

i think it is optimistic on tax reform, by the way. reform ise think tax less likely than tax cuts. writingeconomic indices and trending high. growth has been picking up. but i think what really matters for determining where rates go, where the dollar goes, is where does inflation go? what we saw was a big spike in gasoline prices as relates to the hurricane. we can see, over the next month or so, that affect where off -- wear off. in terms of whether i am bullish on the dollar because of tax reform, i do not think so. the economic impact is limited. maybe 10 basis points on the yield. levels,for us, at these in terms of the price, we had a nice 4% rally in the dollar. that is a nice way to play. jpmorgan david kelly

as a management and jordan rochester of nomura. sterling falling against all of its g10 peers as pressure mounts on theresa may to speed up the brexit process. her leadership under threat. coming up the little later, ge up 2% in the premarket, down 35% on the year. pressure mounts on the new ceo to do something. he begins by cutting the dividend in half. a cut to the ge dividend for only the second time since the great depression. this is bloomberg. ♪

♪ u.k. prime minister

theresa may under increasing pressure as she faces weak support from her own political party. the next five weeks will be critical after a summit last month ended in failure. editor emmaexit ross thomas joins us now. news over the weekend that she could face a leadership contest. how close are we, really, to a leadership contest in the conservative party? >> it is hard to say. the question one has to ask is does the tory party really want a leadership challenge? once -- conservative lawmakers are clear they do not want to trigger another general election that would risk bringing jeremy corbyn into power. those are the caveats. may, her authority, is clearly very weakened.

referred to one of her most recent proposals as "thoroughly stupid." so her authority's. also, the party is divided. she has to work to keep onside the soft brexit, those who want to remain ties to the e.u. and the whole time, she has the boris johnsons, leo trotskys, pushing her towards a more bold, aggressive split. jonathan: just like in d.c., the palace intrigue is fascinating. but the substance of the debate is what is important. there were three issues we were meant to address by now. brexit, the border between ireland and northern ireland, e.u.he citizenship of citizens. thebrexit bill from european side needs to be

addressed in, what, the next to? will that get done? emma: they continue to fight over the timetable. a clearsays he wants timetable within two weeks. they do not need a clear number. they just need to make clear they do consider themselves on the hook. says two weeks, which would be the end of november. the summit comes around, they are prepared. they do not want to be doing negotiating in the summit room in mid-december. they have made that clear to me. -- may. david davis has said the real deadline is in december. we will have to see which side prevails. jonathan: bloomberg's emma ross thomas, thank you. sterling very much under pressure as pressure builds against prime minister may and

her leadership. for more, we bring back toward in rochester of nomura and david kelly of jpmorgan. sterling is my base currency, hammered against every single currency today. only a week or two ago, we were trading monetary policy. be fading all of that and focusing again on politics. is this still a political currency? >> it still is. the focus on a monday morning without any other news. for us, this is not really new news. but in terms of what is being isd, the number of mp's being increased. number is unreported as to what the source comes from, but that number is around 40. says hang on, this is a

game changing moment. so we are still in that low probability, but rising probability, of theresa may having to step down at one -- some point. in terms of the headlines, we also had david davis said he was not really prepared to give a final exit bill or even a formula. that is something the e.u. has agreed to as well. they match up quite a bit in terms of what they want to achieve. it is just slow progress. in terms of year end, we have a large cup ability of something we have a large probability of something being agreed to mid-december. david: without the markets had priced and everything on the brexit side. but every time we turn around, there seems to be further downside. when do investors say it is safe to come back in?

david k.: i think markets and politics are somewhat similar here. have not really latched on sue the reality that is in the bargaining -- brexiteers have not really latched on to the reality. tougherl drive a bargain, because they feel written has less to lose. from an investment perspective, i sterling comes down, it does help the export sector. it is something of a safety valve. to investors, you maybe want hedge the currency, but there should be u.k. companies that benefit in the long run. i think we eventually will. it will just cost britain fairmount in terms of alimony payments -- a fair amount in terms of alimony payments.

it did not push up sterling. we do not need higher sterling. jonathan: it just makes me wonder what we actually achieved. david kelly sticking with us. jordan rochester, thank you. a stock we are watching route the day at bloomberg, ge. down 35% through 2017. new ceo john flannery with someone to do. he begins by cutting dividend for just the second time since the great depression. ge cutting dividend in half. curiously, the stock up in the market. this is bloomberg. ♪

♪ emma: this is "bloomberg daybreak." uber has set the stage for one of the biggest private deals forever. it has approved softbank's

offered to build a half billion dollars stake. they will be able to buy up to $9 billion of shares. bitcoin is plunging. technologyation of a upgrade has prompted some users to switch out of the cryptocurrency. that spooked bitcoin speculators and led to a 29% fall from last week's high. bitcoin cash, these split from 40%original bitcoin, is up from friday. general electric will cut its dividend in half as part of a restructuring plan being unveiled today. ge says quarterly payout will be reduced to $.12. plansile, john flannery to focus on aviation and health care. it would exit most of its other operations. david: thank you. for more on ge, bloomberg

gadfly's brooke sutherland is with us now. this is not unexpected. so what does this say about mr. flannery's strategy? if he is going to keep the money, how will he spend it? brooke: it is a good step in the right direction. there was a question in how radical flannery would the. he is saying all the right things, but he is a 30 year plus veteran of the company. how far is he really willing to go? seeing this 50% cut in conjunction of exiting most of ,e's ancillary operations investors think he is moving in the right direction. as far as what he will use the money for, he said there needs to be balanced between paying out the dividend and investing in growth for the company. right now, ge is struggling to get its earnings on track. it needs to find a way to grow

its profit. david: where is that growth coming from? his predecessor was really into the internet of corporations. re-trenchingbe that. times" saying given what is going on with renewables, they are in trouble -- of their power unit is in trouble. brooke: i have written that maybe they should think about separating from power. it is a legacy business, but it will not be good for a wild. it is mired down in this slump after go on for years. -- it is mired down in this slump that could go on for years. growth is in aviation and health care, so why not be in those businesses rather than holding onto these power businesses that are not seeing the same kind of demand? jonathan: joe kaser of siemens

said how many large gas turbines we have sold in germany in the last three years? how many were sold? 2. it raises the question of whether there is a future for these large, big manufacturing giants that, 20 years ago, where the darlings of the market. what do these companies look like? david k.: there is a future -- i will not talk ge in particular. how you manage an individual company, there is a division in markets between those companies in which you can invest your hopes and aspirations in the technology area, where it is all about future cash flows and companies that have to deal with the here and now with the slow-growing global economy. global economy is fine in terms of employment, but we are talking nominal ge at 3% to 5%. you will just not see the revenue growth.

it is much harder, from a stock market and investor perspective, to get people excited. david: stocks up in the premarket about 1.5%. -- jonathan: stocks up in the premarket about 1.5%. how much should we anticipate their reaction? brooke: it will be interesting to see how this plays out. i think in conjunction with this reporting that ge will streamline and focus on a couple of divisions, people were getting a little worried towards the end of last week that maybe we would not see a dividend cut, because there was some thinking that if they would cut the dividend, they would do it last week, then today, bring out good news about everything that would be great. so i think there is a little relief that he would take these steps that many people believe are necessary. david: it really strikes me, the role technology plays. you have new tech companies,

traditional companies are having a tough time making the turn. david k.: and there is a certain amount of sclerosis here. a lot of tech companies are able to get by with we will manage on pure growth. if you are an old company, it is tougher. the other thing is think about how many stocks are up strongly the last few years. there are not that many stocks to pick from. people are desperate to find some way to reallocate or folios, but you do not want to sell your winners. jonathan: and this stock is very much a loser. bloomberg at flight's brooke sutherland, good work as always. there is pain in the bond market. ♪

♪ jonathan: about two hours away from the opening bell in new york. scores as follows. future a little softer after last week's losses on the s&p

500 snap an eight-week streak of gains. the first week of losses in about two months. softer in europe. the dax down a solid 1%. market --in the up as in the fx market, the dollar stronger against the euro, a whole lot stronger against the pound. the dollar-yen about 2/10 of 1%. in the yield, it has flat and once again today. the trend through 2017 again. let's get you an update on what is making headlines outside the business world. here is emma chandra. hill, anotherol sign that house and senate republicans have major differences in tax reform. kevin brady says the house will reduction -- accept in all state and local taxes.

in saudi arabia, a senior official is rejecting speculation king salman may abdicate in favor of his son. has assumedince greater power this year. he is believed to be behind an anticorruption drive that led to the arrest of dozens of prominent saudis. and there is a new challenge to prime minister theresa may within her own party. 40 conservatives member -- 40 conservative members of parliament has signed a letter of no confidence in her. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. jonathan: thank you. investors pulled $1.2 billion out of global etf's. -- etf'she bloomberg

-- rate still expecting a increase in the face of market volatility. it could come in december. >> i have to look at all of the data. and saw a weakness, that is why i penciled it in. if we saw weakness, i would be ok with waiting a little bit. expect that, so i would be supportive of an increase in december. jonathan: joining us is michael mckee and david kelly is still with us around the table. what could stop them from hiking in december? a softening of the data? how likely is that? or a continuation of the bond market? michael: it would have to be a softening of the data. the route and the bond market, it is worse and better than it seems. a $1.9 billion dropped last week , not a $1.3 billion dropped. however, over the last year to

date, the bond flows are up 8%. so this is a minor drop in the context of the overall. they are up 18% over the last year. i spoke with eric balchunas, and he says every so often, you get this selloff, but it does not last long. the reason is you have junk bonds paying so much more in yields. treasuries are only yielding 2.3%. you can get you -- you can get double your money. jonathan: what do you make of the widening? david k.: exactly that. you will have these episodes and, frankly, junk bond yields are low relative to what they would be historically. but where will you go? a correction is anything over 3%. so we see people get out of an asset class, get out of individual names. while, itaround for a

seems to be over, and they have to get that in. -- get back in. i think the federal reserve will continue to raise rates. one of the big things going on is even a change of personnel with janet yellen possibly retiring next year, bill dudley saying he will not be there, the intellectual giants in terms of making the case of being dovish, they are leaving. fed.leaves the on a steady autopilot. david: -- that leaves the fed on a steady autopilot. david: somewhere worried that cpi data was going -- some would be worried that cpi data would be weak. michael: you can see worldwide we are seeing inflation well below target. u.s. numbers have been a little elevated because of energy prices. you take that out, and it will

come down a little bit. but as long as it is not falling , the fed is going to continue. they are the ultimate free riders. you have the european central bank and the japanese still putting money into this system, so the fed has a chance, without really disturbing the markets, to continue raising rates and get back to what they think of as more normal. >> and they are really getting more focused on the issue of asset prices. that is the real threat. you have to normalize rates. every year you leave rates abnormal, you distort it more. is it ahe question is credit problem here? is there any indication that -- david k.: not right now, but i am worried we will get this indian summer of growth. if we get us tax bill, we will

get this growth, then slowdown down next year. suddenly, it dawns on people that the present is a pipe dream. a danger zonee of for the high-yield market. right now, growth looks good. jonathan: there may not be a broadbase in the credit yield, but there are single-game sector stories last week. when the spring deal collapsed, the pressure was on spring debt. so something is going on somewhere. is a sector something you are worried about? david k.: i need to think through how they turned the economy, but overall, the economy is doing fine. the energy sector is not really a problem as much as it was. so i am hard-pressed to find a big center in trouble. trouble.sector in jonathan: we had issues last

week in the energy's base. when you think about what the debt market has been used or, traditionally and a -- has been m&a.for, traditionally this is how wide open the market has been for that. does it close somewhat and is their president for what the companies would like the market to use this for? david k.: in terms of energy, you can see a lot of optimism built in on much higher energy prices. so there may still be the need to capitulate to reality. overall, i do not see a lot of prejudice in investors. exuberanteel they get about high-yield and anyone sector. so i do not look for radical mispricing.

david: what about leverage on the balance sheet? people said you do not need to worry about leverage when this -- with this interest rate. if it goes up to 2%, will that shake the balance sheet? michael: in general, companies are not terribly overleveraged. there is also a wild card. if we get this repeated your asian -- if we get this repatriation tax bill, some of this will come down. jonathan: you think that will happen? supply will come down? david k.: yeah, i think repatriation will help. ,ut redeemed rather than forced that will make a difference. interest rates are really not a problem, because rates are low. obviously, high yields need to be refinanced more quickly.

but for the moment, the economy is good enough to do it in general, while investors will continue to be skeptical of individual. michael: names -- of individual names. --hael: david k.: the fed is pulling down the balance sheet lower. their actions are part of a much bigger bond market than we had 10 years ago. so i am trying to get scared about the bond markets, but the are grizzly. bloomberg's michael mckee, thank you. apparently, volatility is elusive across all asset classes, except for maybe bitcoin. we will catch up with what is

happening with the cryptocurrency in a moment. for our viewers on bloomberg tv, is you are stepping away from the tv, you can hear our colleagues on bloomberg radio. city, this is bloomberg. ♪

♪ emma: this is "bloomberg daybreak." this is a hewlett-packard enterprise greenroom. coming up, michael shaoul. this is bloomberg. now to your bloomberg business flash. fight with-- at&t's

the justice department over a deal is headed for a thanksgiving showdown. the government could file suit to block the deal. boeing reporting victory. 40 ofes has read to buy boeing's planes. to airbus, a blow which had been counting on an emirates order. bloomberg spoke to emirates' president, tim clark. >> we always asked for something along the a710. over the short term, has better economics. emma: emirates originally ordered 30 airbus jets before pulling out of the deal. bitcoin is plunging.

the cancellation of a technology of rate has prompted some users to switch out of the cryptocurrency. that after bitcoin speculation had prompted an increase of up to 500% this year and a 24% drop from last year. meanwhile, bitcoin cash is up 40% from friday. that is your bloomberg business flash. david: for more on the bitcoin story, we turn to our european tech correspondent. what caused this fall off in bitcoin? >> last week, it was the cancellation of an upgrade to the original bitcoin. investors had been looking to this upgrade to tackle one of the main problems that bitcoin has to deal with. that is scalability. bitcoin processes transactions very slow -- more precisely, the lock chain under bitcoin processes very slow. have beencientists

trying to find a way to speed up this processing. the upgrade last week was supposed to address that with classic the coin -- classic bitcoin. so when it was canceled, that cost a lot of uncertainty. david: i am not a computer programmer, so my understanding of block chain is limited. but in my understanding right that there is more than a technical issue, that there is a misunderstanding about what it should be? is that fair? ed: yes. there is a really important debate taking place in the bitcoin community right now on can this computer program, can coin, remain true to its origins and to the philosophy that created it in the first place? there is one camp that wants to allow they going to scale much faster, so it can be utilized by

merchants. but there is another faction that once big going remain true to its original purpose. if there is any expansion on processing, they want it to be in the original spirit of bitcoin. these camps are battling, fueling volatility. jonathan: when i think of traditional -- it is rate data, politics. what is the driving force in the valuation of something like bitcoin? if you are trading on this, a speculator, i would not have technologywas a upgrade on one and not the other . what is the driving force behind the fundamentals in the value? ed: that is a fascinating question. it is almost philosophical, when you ask "what is that going? -- "what is bitcoin?" now, the way the valuation has

multiplied by leaps and bounds, everyone is talking about it as a store of value. is tellingthe market us everyone believes it is here to stay. everyone believes it has some massive game changing purpose. we cannot see exactly how that happens, but we believe it will, so let's invest. that might be the extent of it when it comes to invest a consensus on why they are buying. david: bloomberg's and robinson, ednk you for -- bloomberg's robinson, thank you for joining us. coming up next, a deal about at&t's and time warner's merger. go to tv on your terminal. this is bloomberg. ♪

♪ david: this is bloomberg.

after a relatively slow year or mergers and acquisitions, rings are picking up with word of a possible objection from the to the at&trtment and time warner deal. antitrustt with this -- in washington. politics?titrust or >> with this administration, anything is possible. as you know, the people who populate these agencies are well intel -- well intended, hard-working people. they see something. i do not buy the political angle, despite the comment that donald trump made about this deal. that was unusual, but a lot of

things about this president have been unusual. leads toer or not that a remedy, it is hard to tell. it is sort of a vertical transaction. i cannot think of a vertical transaction that has been blocked. time. it has been a long the concern is they would use their position to disadvantage other suppliers of programming. are they really going to take that the court? bob: that is hard to tell. from the outside, i do not have any better view than anyone. you would think that, basically, a new team would not take on nolan ryan in his prime. you would take on someone in a decline. but there is a lot of tough talk. was prettyat&t tough. usually, vertical deals are solved by agreements, unlike horizontal deals, where there is -- issue, a device which are

divestature required. month, before the election, a monster m&a. then things changed. if you are sitting and watching this deal play out and the politics and theater around it, does that make you hold back, or are you seeing things pick up? bob: things have really picked up in the last x weeks or so -- six weeks or so. deals have a larger gestation period then you would think. this was actually a very active year. hate to say it, because these are still big deals, but other $1 billion, they do not make the front page of the "wall street journal." but things are very active. -- nonancing market is

problem. $100 billion -- that is like a nation. jonathan: given the moves over the debt market and the last week. bob: yeah, but deal financing markets are great. because it is one place where banks can really make money. they hope you do not have to loan it. jonathan: so qualcomm, that could be the biggest tech deal ever. that has time to play out. but the tax reform makes things interesting. you think the money be brought home and be used beyond just dividends and buybacks? bob: the biggest part of the tax proposal in the last week is there something exotic about them. things like the border adjustment tax, that was a big

negative, because how do you orue and auto parts company retailer, anybody who would have been hit significantly by that? have beenon -- we talking about it for years. people are starting to think it is real. -- it will bewill some of all of the above. for more m&a,dder especially if you are not a gargantuan company but someone who needed to put equity in a deal to get financing. david: from a deals point of view, on the one hand, do people want to wait until tax reform is pinned down, or is there any concern at all that the debt market may not always be this favorable? bob: i think it tilst to the latter. -- tilts to the latter.

repatriation could have some effect. so who knows? uncertaintynating is the big thing. after all these years of talking repatriation -- he will not have tax reform, but some things will happen. repatriation seems to be one of them. david: despite what is going on, this report about at&t, is there a sense that we have a favorable record story environment? favorable. one of the things about the obama administration -- it was not politics. it was philosophy. your view of how to govern. it was very anti-merger. that was not the president. that was the people at the top of these agencies. that is gone. at&t, so there are a couple of things out there. but there is no question that the sense is big deals get through. jonathan: i do wonder why you

need this tax cut, this tax reform. harmed, because the debt market is wide open for them. bob: i do not think it is for apple, although apple does borrow money to pay its dividend. apple borrows money to pay the dividend because it is all short it is the smaller companies. jonathan: thank you for joining us. coming up, michael shaoul, market field asset management chairman, ceo, and founder. his ideas on tax reform, jump debt, and more. softness from last week carries through into monday. futures down about seven. ♪

♪ >> regional stability dominates

tourinal leg of the asia with the house and the senate on a collision course on a tax break. may faces a revolt in her own parting. dividends forits the second time since the great depression. from new york city, this is bloomberg daybreak. futures a little bit softer. we are down by a quarter of 1%. the dollar stronger against the euro. a whole a stronger in sterling. treasury market, a steeper yield curve into the end of last week. we began a new trading week. >> we turn to emma.

manila, president trump of the philippines leader have bonded over their dislike of former president obama. that is according to a filipino spokesperson. he also said president trump seemed sympathetic when do a day -- when he discussed his or drugs. doris a major differences on tax reform. the house would not accept the senate proposal to eliminate productions for all state and local taxes. that provision would be opposed by members of high-tech state such as new york and california. a deadly earthquake has struck the iran iraq border region. almost 3000 injured at over 300 killed. it had to 7.3. it hit a whirl, mountainous area. global news 24 hours a day.

in more than a hundred and 20 countries. this is bloomberg. big week in tax reform down in washington with the senate marking up its bill. the house expecting to vote on its own version. we welcome maggie gage. she is with credits lease. .- she is with credit suisse talk to us about the timetable. how realistic is it? maggie: we think the individual chambers could meet their timelines of moving the bill through the house and senate by the end of this year but having comprehensive tax reform packaged up through both chambers at a conference committee writing of the year, that's overly ambitious. it will most likely spill into q1 of next year before he see a final bill. talk about the

committee. is it a problem they don't agree on some basic issues or is there an issue looming with keeping the government-funded? maggie: absolutely. the government funding, kits the timeline. it's one of the reasons why we say tax reform is going to have to spill into next year. there is going to be differences between the bills. there's the difference between house and senate legislation with anything we passed. when those big piece of legislation come through the process, they are always inherently different. have been ources doubt in the conference committee process. we feel that will be no different this time. the mathg to be about game and the support game. how those two dynamic shakeout with one another. what we hear from outside of washington is that congress has no choice. they have elections coming up next fall. they have to get something through.

significantlyre likely than not the we will get tax reform. is that right? maggie: there is political pressure but beyond that i think there's a well beyond that pressure -- a will be on that pressure. the fact that we see a bill come to the house committee process and appears poised to pass in the house for, it seems the count is around seven defectors in the gop party and they could lose 22 votes and still pass. we think forward progress is being made. we remain cautiously optimistic but rather optimistic really that by q1 of next year that we will see this. you with us.ve thank you very much. potentially more deal flow. brookfield property proposing to -- ghe rest of gdp -- gdp g p.

, inremarket, up three or 4% line with the offer part. reform wider market, tax has brought an eight week's stock rally to a pause. concerns mount about the timeline for tax cuts. join us with more is michael d. wic --and jeffrey as jeffrey aswick. michael, first to you. thepeople that say that market doesn't expect to happen in a thing in happens and do see is plus the others say it's in the market. which one is it? it -- how do you really know? really knowsne

anything but the market has next vacation the tax reform is possible. but that's not what got the s&p to 2500. it's still a fundamental economy story and a corporate earnings story. people are skeptical that if something is passed it while a massive effect on the coming that is doing ok already. i'm agnostic as to if they get something done or not. it's not what i invest. many are saying the economy doesn't need it. does corporate america needed? it's a use itut or lose it opportunity. if they do get a pass, it will be interesting. it will be the first major piece of tax legislation passed outside of the crisis. in gotgo back to 2001 done because of 9/11. if you look at 2009 at cut done because of the crash. it will be a legislative achievement to get something done in a world that is doing just fine.

might matter for week in the falls apart but it's not what got the market here and i don't think it will be will controls with a market goes for the next 12 to 18 months. you are fixed income person. what effect is any does that have? >> it would be a short-term effect one way or the other. but to the extent the tax plan falls apart, that would be a place where treasuries catch a little bit of a bid for a few days, week at most. i don't think the tax plan is the driving motivation or than of what's going on with even into markets including the bond market. is the biggest risk that it works and stimulate some serious growth? >> that's one possibility. i think the treasury market has other issues behind it. that's on the margin as well. >> we will play this out a

little bit later and talk about junk bonds as well. that say the economy picks up and treasuries get that they of reckoning. do you get a market that's divorced of what happens with the economy ordered us two things it -- things converge again? it's interested then give treasuries could possibly reset. it treasuries could spy car quickly, that could have some ramifications for the macroeconomy and macro in general. you have ant that methodical run higher, i think the economy globally and in the united states would be in a better position to handle that. we have for public percent unemployment right now. pretty low. trillion dollars a fiscal into that is something we have never done before. what is the risk of an overreaction in the fed having to tighten faster? i already believe the

fed is way beyond the curve and to me the bond market is reacting. to bond market is responded the fact that the economy is doing just fine. it's not clear how corporate america would respond to this. significant that most of the tax cuts are on the corporate side versus the individual side. which didn't2001 have any obvious effect on spending. 2009 did have some affect but it was channeled down particular markets. the housing market in the car market. i don't think you they something passed you will see a massive change. what is already happening is an economy which is starting to accelerate and a central bank which is sitting on its hands. i don't think this will end well but it's going to take time to get there. continue into the next segment. they will be sticking with us. next up, the route in the junk bond market accelerated through the end of next week.

we will see have a prospect of higher weights is weighing on the credit market and the wider fixed income market as well. we count to down one hour and 20 minutes away. a bit of weakness last week. the first weekly drop in about two months. five or sixby about points. this is bloomberg. ♪

♪ >> the selloff in the junk bond market getting some steam last week. investors pulling more than a billion dollars out of junk bonds over the past seven days. one expert telling bloomberg is worried about the wider bond market. take a listen. >> there are a lot of likely suspects there. , thes that other banks

european central bank, bank of japan, continue to be highly accommodative and that is one of the reasons we see the long and flat now. i am concerned about that in that's why the pace of removal of a combination has to be gradual. >> we are still with michael and jeffrey. jeffrey, let's talk about that. the flattening yield curve. it's a steeper curve coming to year-end. what's going to drive it? steeper for the rest of the year plus of the course of the next year. a little more conviction for the next 12 months and that will happen. even over the course of now in the end of the year we think the curve steepen a little bit. it's a few things. one, we think inflation and some of the inflation indicators are going to start to go up. not the way this going to create the problems but inflation is

going to start to methodically move up a little bit. just in general, we see a continued game this year of flatter yield curve, lowball, -- low-volume, tighter yields. that's getting to change. what the catalyst is uncertain but that in our opinion is beginning to change. that's why we think primarily we were headed to a steeper curve and seven flatter curve. get 90 of magnitude. u.s. is about 70 basis points. it's also much lower. the flatter yield curve. volatility coming down. what you looking for the other side? twos and tends, twos and fives. they will steepened in our opinion while the five-year will head up to two and a half percent. maybe not by the end of the year

but certainly into the first quarter. >> what are you looking for? >> 65 or 60 basis points. tends willnds -- take a little more to play out. this will start to change course. 2s 10s it down to 60 or 63. that's a screaming buy for banks stocks, isn't it? michael: i think people have exaggerated the effect of the yield curve on banks. viable becausere people have gotten too excited about what a 60 basis point to 10 year split means for them. i don't think the long end of the curve is going to move much. is going tofed high-grade consistently over the next 12 months. i think the two-year yield is

getting costly to 2%. developeduntry with world with inflation is the u.k.. we have seen the gilt market ignore it. i would have thought that was impossible. if you had asked me two years ago or that could happen, i would say no. but i look at it and say ok, fs bond marketme the globally has been tested and has sown consistent inflation ahead of target and the responses, i don't care, why wouldn't the second time play out the same way? doesn't matter as much to me as a test to jeffrey. i'm not invested. i just note that anomaly. i'm coming back to your call. you say the long end of the curve is going to go up. do also think the fed will not raise as much so the front end of the curve will not raise as much? you are saying the backend has to come up more than the front and does. i'm an uncomfortable position

being pretty much inconsistence with the markets. we think the fed will only left a couple times over the next 12 months. the fed willin have to meet closer to the markets than where they are currently telling us. having said that, a different hypothetical, if the login does not live up, the fed is not going to tighten three or four times. they are not going to invert the yield curve. that was the philly fed. i absolutely agree with that. is supportive of a steeper as well. the flatter yield curve and the selloff in junk last week. intoou going to change investment grade? are you going to up and quality? what do you feel about the selloff? i apologize for using some

fixed income jargon. don't apologize to me. >> real money investors in fixed income, being defined as more moneynly traditional managers, banks, insurance companies, they have already slowly been methodically reducing their overweight of the credit markets for at least this calendar year if not longer. that has already been going on. that's point number one. point number two as a relates to the selloff, what is happened of the last couple of weeks, a selloff in certain areas. telik medication, health care. it's not quite yet in our opinion characteristic of a broad selloff.

pointed out last friday that this is the third time that a if youeld market sold -- really look at what happened had week, you essentially etf's having to sell. that's a whole different can of worms. when they have to sell and there's not a lot of other investors buying, you are going to have a moment like that. big picture, in my opinion, this will be a buying opportunity. you to our guests. they will be staying with us. coming up, general electric shares are up in premarket as the company cuts its dividend in half. what else ge is doing to battle one of its biggest am sick and 125 years. ♪ slumps in one of 25 years.

-- 125 years. this is bloomberg. ♪

♪ >> general electric will cut its dividend in half as part of a restructuring. the payout will be reduced from $.24 to $.12. toource says ge is planning focus on air power and health care. brooks sutherland is with us now and michael is still with us and jeffrey as well. let's begin with broke. brooke. what the markets gets and what the market expects is important. is this with a wider market was looking for? expected butat was to your point, we should take this in context. it's a big dividend cut. the last thing we saw was viacom and some oil and gas companies. this is coming as industrial

companies are doing well. you haven't seen in -- euro company cut its dividend in years. -- it was what the market was expecting but we shouldn't take away from the magnitude. will focus on ge aviation, health care, and renewable energy, that's still a lot. >> it is. it sounds like they are looking of theirt transportation business. it's been mired in weak demand. it probably means they are also getting rid of their lighting business. that's not a surprise. and probably some ancillary businesses. there might be pieces of businesses put on the block. to your point, this is not a full sail massive restructuring of ge. i think time will tell if this is enough.

there is increasing appetite among investors that will see a radical breakup of ge with each division as a different company. this is the opportunity to do that if you are ever going to remake ge. this was your shot. there may be some disappointment of investors. time will tell if this new ge is strong enough. how does this play into the larger market? how patient are investors. a great time to be an industrial company. siemens on the other side of the world is doing fine. honeywell doing fantastically. there have been issues within ge but it never really recovered from the financial crisis. it's going to take a few quarters to convince people that they are on the right path forward. it's quite late in the cycle. it's a cyclical company.

to continue going long enough for the new management and structure to deliver something? we are a few minutes from getting the presentation for the investors day. what is it going to take to persuade investors that powers a good place to invest right now? >> that is the big question. they have their work cut out for them. we saw siemens admitting that ordered toities have gas turbines over the past four years. this is not a market that is doing well this year. that's been the profit generator on the service side. you have to wonder whether this is a one time downturn or is this a sign of a return to a known normal -- a new normal widowers see -- normal where we will see a downturn in profits.

>> do you like it when you hear these kind of stories? , other big companies, all pushing to cut costs. is a good news? -- is it good news? >> cutting dividends is good for bond investors. but when you have a company with turmoil, that's troubling. especially want to go further down in credit. >> thank you very much. up, may under pressure. sterling under pressure tube. this is bloomberg. ♪

♪ some are about an hour and change from the opening in new york city. we had eight straight weeks of

gains and than a week of losses. that softness today as well. down by a third on the dow. in the bond market, a flatter yield curve and then steepened into the end of the week. that resumes. some broadbase dollar strength against the euro. some yen strength coming into the market. 113 .26.n at prime minister theresa may under increasing pressure. hasfollows support -- she party.e from her own our brexit editor joins us now. and our european government as well -- european government reporter as well.

let's talk about what is happening domestically and u.k. before we brought this out. is prime minister may about to fight a leadership contest was does the same news we've heard the last few weeks? like we haveel been here before. it was a month ago that theresa may face down and attempted coup. conservative lawmakers don't really want a leadership battle. there is a fear among lawmakers that leadership campaign could accidentally lead to a general election. test the last thing that they want because jeremy corbyn is ahead in some opinion polls. that is the underlying risk. the authorities clearly undermined. -- the authority is clearly undermined. of her party members scribe

one of her proposals is stupid which is unprecedented language. we had reports that boris johnson wrote a memo sitting out what he thinks are policy should be. these are small rebellions that are being tolerated. it underlines how weaker authority is. >> i'm trying to work out if he's friends again. he must be. looking at the situation from it you -- eu point of view, it seems they have two weeks to sort out the brexit bill. thehere an understanding of european side of what theresa may can achieve and the strength she has at home to give them what they want to see? >> there is an understanding of the difficulty she is an. -- she is in. look over with baffled concern. we want to deal as much as most

of those in the u.k. does. is not going to give in or capitulate just because theresa may is having difficulty with the rest of her cabinet. they said three things out before talks can advance in december. that's getting some kind of agreement on the money as well as this problem between the border of ireland and northern ireland. youeu is saying we know have trouble but we are not going to be any softer on those three things. you're the one who has to sort it out. it strikes me, those three things have been on the table for a good long time now. has any progress in made? -- has any progress been made? >> there has been a little progress. that was the easy issue. on the bill, it's important to

note that the eu isn't asking for a number. what they want is for the u.k. to a knowledge that it is on the foot for certain liabilities. liabilities the u.k. signed up for while it was a member. i think it's clear that if the u.k. doesn't make some kind of clear signal, probably by the then talksmonth, won't move on december. >> thank you very much. some breaking news from ge. the adjustment to a dollar and seven cents. the estimate was a dollar 18. . eps from asted

$1.07.to let's cross over to taylor riggs for a few more headlines. what have we learned? some of the key headlines. the adjusted earnings per share are lower than previous estimates. framework for free cash flow. anywhere between the six and $7 billion. you mentioned the dividend they cut by 50% down to $.12. we have seen a little bit of a pop. some analysts had expected that that dividend cut would come last week. indeed it did come today. waiting forwe are some headlines to come out. some of the asset sales the company is going to make.

ony might do a focus here aviation, power, and health care. anywhere from 20 to 40% here. maybe looking to cut back on some of that transportation. we are getting some more headlines here if you want us to read it out. they are establishing a new finance and capital allocation committee. it needs to align its dividend payments with cash flow generation. i can bring you more headlines as those crop up. adjusted earnings per share down to between one dollar and $1.07. it's the realities are these companies have to deal with. these reliable, juicy dividends. needs to rely dividend payment with cash flow generation. if you plug that headline into a lots of companies, how many

others need to have a look at how much cash flow they generate relative to the dividend and how many need a reality check? earnings are still getting better and i think the market is going to be patient. anything you could learn from or teva is that when this cycle turns turtle and when corporate earnings are going down when people expect them to go up, there is a. a volatile adjustment in asset markets. that is true and equity and fixed income. you can't learn something about ge from the wider market today. it's not the right time in the cycle to have ge tell you what happens with the rest of the target. reassured make your or does it worry you? earnings are one thing. cash is something else. earnings are not necessarily the same as cash.

cash is what allows you to pay bondholders. feel littleus better that they are planning this far out. in retrospect these wish they still had their finance divisions. with ge in particular, it's positive. i agree with michael, right this second is of the time in general to be that worried about corporate finance because we are not the end of the cycle. the cycle could be going on for a few more years. hit the trouble is going to the road is when the cycle is over. problem for a lot of companies, especially in high-yield. so many companies have slowly levered up to buy back dividends, pay dividends in things that they buy back stock. that means of the next downturn comes, it could be ugly. >> jeffrey, great catching up

with you. michael will be sticking with us. coming up, bitcoin volatility. commute and today, you can to into all of our colleagues. they will be over on bloomberg radio. it can be heard across the united states on serious. -- sirius. this is bloomberg. ♪

♪ hour,ing up in the next the former jcpenney's will share insight on earnings. and the outlook for the sector.

your bloomberg business flash. uber has set the stage for one of the biggest private deals ever. they have approved softbank to buy a multibillion dollar stake. upy will be able to invest to a billion dollars and buy up to $9 billion from investors. the largest meat producer in the u.s. posted better-than-expected earnings. tyson foods reported strong demand for beef, pork, and chicken. boeing scored a big victory on the first day of the buyer show. 40igrants has agreed to buy boeing 787's. the deal is a blow to boeing's main rival airbus which had been counting on emirates quarter. that is been your business flash. -- that has been your business

flash. this learned earlier morning that ge would cut the dividend in half. it's only the second cut to the dividend since the great depression. it significant. targeting 2018 adjusted eps from one dollar to one dollar seven cents. were estimating $1.18. 2018 will be nowhere near revenue growth. they will be boosting the size of their board from 12 to 18 members. we were expecting some of these headlines. some people are saying it's about time. >> the question is is this enough and is this fast enough? he will need those members of

the board. let's look to bitcoin now. they saw a 29% plunge from record highs. welcome in our european correspondent. bitcoin seems to be coming up a little bit right now. this is a currency or not? >> i think the lesson of the last few days is that investors are chasing scalability. bitcoin, thisee innovation, have the capacity to grow per demand. handlent to see at volume and process transactions faster. i think that's why you saw that selloff after they canceled this technology upgrade last week and then there was a huge shift into bitcoin cash which is an alternate bitcoin out of the

market since august and has a different way of processing these transactions. i think that's the upshot from the last few days. did the money just go over to bitcoin cash? there's a believe it is more scalable. yes. i believe bitcoin cash surged 30% so we have to believe there was a lot of conversion. other cryptocurrencies might have also accepted some of that money. maybe some of it stayed on the sidelines and as you see bitcoin start to stabilize, it's starting to come back in. me about the complexion of investors and bitcoin right now and how much it has changed the last year. how serious has it gotten on wall street for the big players? that's the big theme, is bitcoin mainstreaming? playersig wall street experimenting with it, saying nice things, jamie dimon notwithstanding.

they accept bitcoin in the fidelity cafeteria now. to answer your question, i think what we are seeing is bitcoin is geeksting more than just and libertarians and people who are in it for philosophical reasons. it started to attract more mainstream investors. >> is attracting you, michael? michael: i have enough excitement. i was grateful in the dull days could you have some you can watch. i think the technology looks to be here to stay. find ways toto embedded in general commerce. the price of the coin itself, however, is a peers speculative market. you can think of markets being driven by fundamentals and by price itself. bitcoin at this time mr. ivan -- bitcoin atrely --

this time is driven entirely five price. entirely by price. eventually it will have a destructive decline. comes into its second chapter of being appreciated for its fundamental qualities. it's here to stay, but as what? what does a correlate with or inversely correlate with? how does it fit? thatat's a question private bankers and asset managers are all asking themselves. right now, it is a currency, i guess, technically. but how can you have a currency with this much vaulted of the -- this much volatility? so they say it's like gold. but it isn't like gold. bitcoin debate

will continue for some time. we do have things that we value because of consensus. there could be a consensus, he's not sure will happen, around bitcoin or other cryptocurrencies. what role do they play is an investor? a typical cycle, expected to cycle, is the thing goes up an awful lot. whether 8000 or 18,000 is the peak, i have noted few. they decline between 50 and 80% and then they bounce back and find a range in which they exist. isn't like gold, but it has some of the characteristics in a speculative phase. when it went to 50 it was a sustainable and it had to come down to 12. when you argue about silver, you're talking about $.30, not $30. clients arguing

about an out patient to it? >> i don't -- arguing about an allocation to it? >> i don't have that kind of clients. everybody is looking at this as an opportunity to get involved. it's just how things work. >> great to have a with us, michael. thanks for joining us. and robinson, thank you ray much. coming up next, we look at what could be one of the largest private start of deals ever. details on softbank's investment in uber. that's coming up next. you can follow all of this on tv on the bloomberg terminal. check us out. you can look at graphics and interact with us. this is bloomberg tv. ♪

♪ >> it could be the biggest tech

takeover over -- ever. broadcom going after qualcomm. rejects broadcom's unsolicited proposal. we talked about a lot. you are broadcom, you look at a stock price that hasn't rallied with the wider sector. you see a company that is involved with big deals. a battle with patents over apple. you since an opportunity. >> qualcomm is apparently to medically undervaluing the company. -- is apparently to medically undervaluing the company. they are trying to take advantage and get a cheap price. they're offering $70 a share. you are trading below that. the stock premarket, if you're

looking at qualcomm, this was widely expected for so many people. it trades at about 64.25. below the offer price. saying they have good relations with apple, a major customer of yours. you have terrible relations. there's value to the relationship. >> they've executed the pr beautifully. the president talks about relocating his headquarters. falls it up with one of the biggest takeover deals. could be the biggest tech takeover ever. the pr around broadcom is looking good for a big deal. donald trump respects that. he appreciates pr and a good showman. qualcomm rejecting broadcom saying it's not in the best

interest of holders. looking at the premarket action, qualcomm pretty much unchanged .t around 64.50 offer price at around 70. 624.61 is where it trades right now. -- 64.61 is where trades right now. it's a market that is not expecting the end of this. this is the situation, qualcomm board rejecting the unsolicited proposal at $70 a share. says it's not of holders. a big dealt has team, it's at hammond. but itt quite unexpected feels like the first step in a long journey. you pointed out, shares are basically unmoved.

this is something, the relationship has never been very good. or very bad. qualcomm are trying to do a deal with a company called in xp. called nxp. difficult.hat is you mention nxp. semiconductor space, this is deal on top of deal on top of deal. there are five layers of deal speculative is offering. are they going to get the deals that are already on the table? that is one of the huge challenges of this. how do they get qualcomm and then absorbed nxp? it's difficult for qualcomm to pull out so broadcom would have to subsume both companies. it's the russian doll of deals.

it has a long way to play out. i don't know what number would knock them over. ultimately, this is something the shareholders get to decide. fantastic story that might have some legs. qualcomm rejecting broadcom so -- broadcom's proposal. we will bring you more coverage. next up, jonas around the opening bell is the former jcpenney ceo. he will tell us about the outlook for the sector. 34 minutes away from the bell. futures just a little bit softer. this is bloomberg. ♪ is this a phone?

or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. ♪ jonathan: regional stability dominates president trump's asia

tour. at home, the house and senate are on a collision course over tax breaks. broadcom'sjects takeover offer. battle aceo begins the deepening slump by cutting dividends for just the second time since the great recession. good morning. this is "bloomberg daybreak." i'm jonathan ferro alongside david westin. alix steel is a way today. 30 minutes away from the opening with futures a little softer after last week's losses. the euro makes a little come back. euro debt debt flat. in down as coming basis point. abigail: thank you so much. m&as turning out to be an monday. before we take a look at those deal movers, let's take a look

at ge. 0.3%. are higher they are slashing the dividend by 50% to $.12 per share. that is only the second time since the great recession. they have offered new guidance. they are standing by the idea that they are going to be getting rid of $20 billion in assets, plus they are reducing the board from 12 to 18. the stock have been higher iq %ercent earlier on -- by 2 earlier on these headlines. technically, if ge holds $20 per share, it could turn out to be an inflection point. one a look at mattel, up reports that hasbro has discussed a possible

acquisition. these are the two biggest playmakers in the u.s., with terrible third quarters in part due to the toys "r" us bankruptcy. we see hasbro shares trading higher too. some of this for mattel could be short squeeze. at ggp, upke a look nearly 7% as brookfield is said to make an offer for the remaining 66% of the company they do not own of the retail real estate company. they started acquiring a position in his company although it back in 2010. was a point, this stock 17 sencent stock. could be a bitp

of a squeeze. david: thank you. president trump is winding up that asia tour. there has been a lot of talk of trade. washington is all about tax reform. we will be joined by kevin cirilli coming to us from the great capital. us aade in asia, give recap. there was president xi and president trump. president xi all about multilateral. president trump just about bilateral. kevin: this has been an interesting back-and-forth between leaders. president trump has met with vladimir putin. the readout from the white house has differed significantly from the readouts of the foreign press. it is interesting that we have to point out that when president trump met with vladimir putin, a brief five-minute conversation over the weekend, president

trump making some controversial remarks and not forcefully d in theng russia meddle election. hours later, mike pompeo cia director said russia did in fact meddle. there has been a lot of interesting back-and-forth over the weekend. today saying human rights did not come up. the white house saying it did. david: there seems to be an interesting back-and-forth between the house and senate on tax reform. a lot of people are skeptical. a lot of pundits did not expect them to get this far this fast. kevin: they did not. thursday is likely when the house will vote on their tax bill. there are significant differences between the house version of the bill and the senate version. occasion case in point the number of tax brackets and the

state and local tax deduction. later today, the senate will have a meeting. this is headed for a collision course in terms of reconciliation when they will have to reconcile these bills. david: thank you so much. jonathan: thank you. tax reform has appeared to bring market rally stock to a bit of a positive joining us on market reaction is walter todd of greenwood capital associates and gina martin adams, bloomberg intelligence chief equity strategist. it was a minor pullback. was if you will buy jitters about tax reform? i think tax reform is the easy scapegoat. at the end of october, we got to a point where the market was more overbought then the point in any of the last 10 years.

this creates a little bit of the jitters. when you look at the declines last week, the greatest difference was in financials, which suggests this is really what is happening in the bond market. maybe there is less growth next year because we don't get tax reform, then you could make that correlation, but that is a stretch because we are so overbought and ready for something of a pullback. jonathan: is this a case where price sets narrative so they blame d.c.? walter: i would agree with what gina said. we have been 350 trading days without a correction. streakthe fourth longest since 1989. investors were looking for a reason to pull back. david: wake up, it is new year's

day. the president has signed a bill somewhere between the senate and house right now, what happens on january 2 in terms of the stock market? think the stock market rallies on the deal actually getting done. if you look at small-cap stocks ,s a proxy for higher tax rates those companies paying the highest tax rates have underperformed recently as the probability of tax reform has lessened. passed this year, which i don't think is going to happen, i think the market would rally on that is. david: how much does it rally? would it be a surprise to the market? walter: it would -- gina: it would be a surprise to the market. almost nothing is priced in as far as expectation. over the last year, we have seen no outperformance on the

high-tech sector. how much of rallies depends on the package. how much of this is corporate? will we get 20% or 25% on corporate tax? what will we get with respect to repatriation? physical and be mandated that they pay that next year? a lot of this depends on the components. any reform is probably going to be greeted positively. jonathan: does 20% in 2018 matter if it is hundred percent 20% in 2019? it is gina: probably not. if it doesn't happen for the next year, we will price that in immediately. jonathan: doesn't matter to the real economy if that is delayed a year? do some companies do more or less as they wait for that tax-cut to come through??

walter: i think it would be a downside surprised to see that in the final bill. i don't think that makes it through the conference committee because i don't think donald trump would sign a bill that had a delay in the 20% rate. interestingly, the delay was done to raise about $100 billion in revenue for the senate version. if they brought the rate from raise 23%, that would $300 billion. i think some compromise comes out in the conference committee. david: are there any particular sectors you think are vulnerable or could get upside? things like real estate, things like homebuilders, or sectors that might be affected by a deduction in the ashleigh johnson in the business -- reduction in the business rate ? walter: effective tax rates in

the mid-20's will not be as advantageous to this deal. financials pay high effective tax rates. domestic oriented stocks would benefit. there is some language in the house bill that favors the tax rate on dividends that could benefit real estate companies. jonathan: thank you for joining us. walter todd of greenwood capital, you will stick with us. rally in the junk bond market accelerates. city as we count down to the opening bell, futures a little softer in new york. this is bloomberg. ♪

♪ is the federal reserve gearing up for another rate hike at the end of the year. he is expecting a rate increase in december. >> i have to look at all of the data. if we saw that continued weakness, that is why i saw it penciled in. if we see weakness, we will wait. i don't expect that, i expect an increase in december. jonathan: turning us now is walter todd of greenwood capital. there are two big things happening in the bond market, flatter yield curve, and the other is this softness in junk debt. how do those things influence the fed's next move in december? walter: i don't think it

influences the fed in december. the interest rate probability is 92% right now. that rate hike is a done deal. if you see junk-bond debt it back up, that could influence their path of rate hikes in 2018. the flattening yield curve, we are at 70 basis point or not, i don't think the fed wants to see that go below 50, so if the curve continues to flatten, that could slow them as well. i think this back up in junk bond yields has been overplayed. we have backed up about 30 basis points. i don't think it is a problem at this point. jonathan: we were in the tight levels for quite a while at the end of october. is that what this is, not some kind of bleed through to worry about? >> i would agree that calling it a route is like calling a molehill mt. everest. returnlook at the total

generated by high yields, i calculated it is the 19th largest drawdown in high yield performance since 2010, which doesn't really touch the sides, i think. i think it has maybe something to do with tax reform, and maybe in terms of the lane some of some of theseing tech companies bringing money back up to pay down debt, but it is really small potatoes. david: you say this is in the want, but sooner or later the high-yield market is going to turn around. how do we know this is the time? what will be the second indicator? >> that is literally the billion dollar question. there are two possible sources, one is in idiosyncratic source, which would be a large unexpected default from a large issuer. the second, probably the more

likely, is a slow bleed as the technical dynamics erode in terms of more supply coming into the market. and the street unwilling to buy more high-yield paper at those prices. for that, you probably will need to see treasury yields move higher. as long as the 10-year is that 2.3%, the global reach for yield is going to be there. people will be willing to say what you might think is unecono mic prices for paper. david: we see stories such as the covenants are getting light. there is increasing leverage on the balance sheet. at what point should we be concerned about the creditworthiness of companies borrowing a lot of money? walter: i think this doesn't become a problem, just like the stock market, we don't want to forget that the general bond market and stock market are very

linked. what is going to ultimately take down the junk bond markets is what is going to take down the stock market, slower economic growth or a recession. we don't see anything indicating any recession on the horizon. we talked about the flatter yield curve. we need to watch that. i don't think it is an issue at this point. i agree with the fact that we are seeing that repeat cycle of lower covenants, and that is always a concern. jonathan: one of the biggest risks or the bond market is not a recession but real growth, real pickup in economic growth. inflation would raise serious questions about how the central banks with responsive that and the bond bulls about this trend would never end. walter: that is a valid point. if we did see economic growth,

potentially the third straight quarter of 2% gdp growth in the u.s., which has not happened since 2004, that is a bigger risk to treasuries that corporate job because spreads would -- junk because spreads would continue to tighten. jonathan: it does talk to a market that is nervous about high-yield. when you get a backup, these things lead across from individual names to the sector, then more, and the whole asset class quickly. cameron: that speaks to almost house real the investment environment has been -- how s urreal investment environment has been this year. it does not take a whole lot to .xcite the chattering classes trying to call the top is economically very difficult, but

it wins you a lot of kudos. the temptation is almost irresistible to be the one that igh,s this is a ding-dong h and after tomorrow it is all going to hell in a handbasket. unfortunately, if you are portfolios, itng becomes quite costly if you try to do that repeatedly. jonathan: in punditry, it pays to be pessimistic, and in markets it pays to be optimistic. cameron: no one buys a newspaper that says everything is groovy. jonathan: cameron crise, bloomberg editorial, walter todd of greenwood capital. the biggest tech takeover ever might have to wait a little longer. qualcomm rejects broadcom's offer. this is bloomberg. ♪

♪ david: this is bloomberg.

earlier today, qualcomm made it official, they will reject broadcom's initial bid, saying it significantly undervalues the company. joining us with more is ed hammond. we know what has happened. what will happen? broadcom on defense, what can they do to defend against this takeover bid? ed: qualcomm, this is what we expect them to do. this is the first offer in a hostile. there is an existing deal in the p, theyor a company nx could potentially increase the price they are paying for that and make it a poison pill. david: what excuse with a give other than they don't want to get bought? ed: that is the real problem. if they do reject the offer and

then brought down comes out and says we were going to offer you 90 a share and now we can only offer you a share -- 80 a share because of that purchase, shareholders will be rightfully furious. if your broadcom, what do you do? obviously, they will put together a proxy for the qualcomm meeting next march. they will probably increase their price a bit, but that depends on what qualcomm will do with nxp. if broadcom as they overpaid for nxp, there is only so much they can do. jonathan: broadcom is a little softer. qualcomm his former. the market thinks broadcom has to offer more money. is that the direction of travel? ed: absolutely. broadcom's offer is a decent

offer. it is a decent premium. they do have a bit of room to go. unheard of that they would be best and final with the first offer. they have already said publicly they will pay this to the shareholders. they don't have to bid against qualcomm management. they are bidding against what they think this company is worth. they will go a little higher and then taken it to the shareholders directly. jonathan: can we talk about running a business now and whether these guys are going to do that anytime soon. we have this deal flow start in this space about 2016. deal upon deal. i wonder when the integration really begins? ed: i hate to say it, but it is really the valiant question. at what point are you running the company as it is versus growing through acquisition? the sky is an animal in terms of acquisitions. he has been buying successfully.

him is a sea change for going after something of this scale and going after it in a hostile way. once this is done, and the depressed futures are forced -- forced upon ite by regulators, it will be difficult to continue this acquisition machine. david: let's talk about it from the other side. does this deal makes sense? whether they like each other or not come but that aside, does it make sense for this area? ed: there has been a ton of overlap. there would be pushback from regulators in europe who have already taken a dim view of qualcomm's nxp deal. there is a lot of logic to this deal. they have a shared customer base. they are also big in different

areas, particularly the internet of things. qualcomm has a stronger hand then broadcom. putting these two together is significant. you put these two companies into the same ownership, you're going to have problems with regulators. jonathan: if they don't like qualcomm plus nxp, they really won't like qualcomm plus nxp plus broadcom. it is great to have you around the table. i think this deal has legs. david: it feels like it. jonathan: this is bloomberg. ♪

♪ jonathan: from new york city, the opening bell moments away. -76 on the doubt. a straight weeks of

gains, and then we snapped that last week with a small week of losses, and a little weakness that carries through to this week as well. softness across the board. in the bond markets, yields coming down to basis points. the dollar firms up. a lot of that is driven by sterling weakness today. that gives you a feel for the cross as a storm. let's go to the opening bell. abigail: the bears are back out on this monday morning. nasdaq, s&p 500, and follows that bearish action you saw last week. the first down action in nine weeks. we are seeing the sellers step in. the big question is whether we are seeing a repricing in risk off, the coin has sold

that is on the far side of the risk continuum, sometimes a sign that stocks are going to sell off. the dow transports down about 6% from its high. we could see a little bit of a pullback from the major averages. we will be watching closely. movers on the open, let's take a look at the chinese internet stock companies. alibaba down just a little bit. insold a record $25 billion merchandise single day. also sold record merchandise in a single day. electric down 1.3%, reversing gains we saw earlier on news that the company is cutting its dividends in half and divesting $20 billion in assets.

2%, nowthe stock was up it seems investors are a bit worried. they have been worried for a while. these bars represent monthly gains or losses. aese down bars, eight down in row, the longest monthly losing streak since 1978. last month, the worst monthly loss since 2009. around that dividend cut, only the second time they have cut dividends since the great depression. the question of whether or not john slattery as president of ge can turn things around. jonathan: it does not look good. joining us around the table and new york, walter todd of greenwood capital. is this a ge problem or a wider signal you take from this? walter: i think the ge situation

is unique to that company. they have got a lot of would to chop -- wood to chop going forward. this is the first step in that process. david: i wonder about chopping wood. woodhave chop a lot of already. they got rid of ge capital. now we have a whole new strategy. how difficult is that for a company when you have one strategy you pursued, and now you have to change it again? walter: i think it is extremely difficult. i don't think we should underestimate the challenge they still face. you have new leadership. you have a new strategy. unfortunately, the capital allocation decisions that have been made over the last 10 years were very much a solo, by high highegy -- sell low, buy strategy, which is never good in

investing. david: it is not like they are just by themselves, they are fighting for margin, fighting for customers. competitiveir advantage that they can really grow in make money? gina: that is a good point. the sector at large is doing well. if you look in the aerospace and defense group, they've done extremely well. durable goods orders are probably up 6% on year-over-year basis. they were up 0% at the beginning of the year. there is clear industrial activity. it seems to be concentrated in the aerospace and defense space and the nondomestic space. i think a lot of this is transitioning to the areas of growth as opposed to some consequence of broader growth depletion. jonathan: talking about growth depletion and were cost cuts are

happening in a significant way. looking at come like unilever and nest play, those companies, big companies were investors are taking a stake and saying you guys need to move quickly, cut costs. is that a wave you want to be on? walter: i think it is difficult to cut your way to prosperity. there are probably some low hanging fruit at these bigger companies that compete globally. the reality is it is a more competitive world than ever today. i don't think you want to invest in the company simply for the prospect by improving margins from cutting costs because at some point you reach a threshold where you cannot do that anymore. you have to grow revenues. jonathan: in the united states, there will be a lot of people invested in ge for exactly that. where do they go this morning? what do they think about doing? gina: i think they will avoid

the yield traps. we don't know that the stock is going to fall much more from here now that they are making these restructuring efforts. maybe the 3.1% yield looks relatively sanguine going forward. obviously, you have to adjust your expectations given this recent cap. i think investors look purely at -- growth has been much bigger driver in returns. what we tend to find is the highest yield stocks outperform in a recessionary area, but we are not in a recession. you need to grow that yield overtime as the economy grows. this is another lesson in chasing yields for the sake of yields is not a wise

investment philosophy. does an investor sort out whether this is the right ceo and team to turn the company around? we have already heard they are divesting themselves of $20 billion in assets. what indicates do you that yes, they get it, they can move forward? walter: i think it is difficult to sit here today and know the answer to that question. things you want to look for is some stabilization in the cash flow. flannery mentioned on the last quarterly call that it has been low. you want to see that stabilize and move higher. there are so many moving pieces to this story. that is one of the challenges of analyzing ge, there has been a constant change. you don't have a baseline from which to judge. i think it is going to be rather difficult to judge the success or how the current management

team is going to do in the future. the bottom line is how the stock ultimately performs and if it starts to go down or go higher. i think it is going to be difficult to gauge that in the future. jonathan: walter todd of greenwood capital sticking with us. gina martin adams of bloomberg intelligence, thank you for joining us. a big week on retail earnings. home depot, walmart, target reporting this week. we will talk about the state of the industry as we go into the holiday shopping season. a session that looks like this, three-day slide on the s&p 500. it is down another one third of 1%. weekeakness from last continues into this week. from new york, this is bloomberg. ♪

♪ >> this is "bloomberg daybreak." markets, erik schatzker interviews kkr's global head of asset allocation. this is bloomberg. ♪ we thought jcpenney was having a good day on friday when strong sales from the third quarter of the stock to a three-year high. alibaba came along and sold $25 billion of merchandise in a single day. it got more revenue in that single day than jcpenney gets in an entire year, by a factor of two. turning us now is allen questrom, former jc penny ceo.

thank you for being with us. start with the phenomenon of alibaba and what it is. how continuing in retail compete with the likes of alibaba or amazon? allen: they are phenomenon, and both gentlemen running those companies are geniuses. not only are they in the retail business, but they are in many other businesses. one thing they don't have without some exceptions, is they do not have a physical connection with the customer. they have an internet connection. i think that is the one advantage that the stores, the physical stores have. they have a connection. they have to connect with something the customer wants. we have lots of brick and mortar retailers that are doing well, but if you don't adjust to what the needs of the new customer are, you will go out of business. this is a company that is over 100 years old. sears is the same way.

if you go back 50 years, 10% of the fortune 500 companies are around. they go out of business because they don't stay up to speed. whether it is jcpenney or macy's, anything else in retail, they have to understand what does the customer need. they have a physical presence. that means they need to connect with the customer when he or she walks into the door. that means having the right merchandise, having the ability to communicate that point of view to the customer, and you have to have good pricing. when you stop and think what a store can do, salespeople that can connect with you, visual displays that makes it exciting, but we should be clear, if you had no bricks and mortar stores around, internet business would be a lot less than what it is today. david: interesting. are you surprised in your career, we all, including me, have gotten used to ordering

online without the physical presence so quickly? stuff with torn -- return for free in no time at all. it seems to be we have gotten away from the physical presence. they are not involved in product themselves. they are a distribution center. without the iphone, this would not be possible. this business has multiplied not somewhat much because of them, although they are very creative but the iphone has a lot of people to do things they could not do at home. they can take that phone with them. they can check the prices in the store. that is why when they go to the mall today, instead of going to five or six stores, they go to two or three stores. this iphone has changed the world. that is why you have uber. it is a transformational issue. by the way, i would also add that jcpenney and macy's and neiman marcus all have a big

internet this is. i think marcus does 30%. when they buy online, that is one less trip they come into the store. when they come into the store, they buy what they want and other things. we see with whole foods that maybe online is going to go to bricks and mortar. is it easier for online to go to bricks and mortar than it is for bricks and mortar to go online? allen: i think it is both. if i do the best job in the world at jcpenney online, i will never be as good as amazon or other public but i believe we have a physical connection with the customer. we should be able to do that a lot better. that means our people have to be up to take chances, go out there to motivate the customer when she walks in the door. i need to have both, and that is why they have gone into whole

foods. i think they have gone there to learn more about bricks and mortar. i don't believe that shopping for groceries will be a big deal on the internet. it may be bigger than it is. it is 1% today. i look at a company like walmart. they have done a terrific job there to transform this wonderful company. if they don't pick up 1%, that is more than most people make as a company. david: it is a big number. allen: you take on a brothers, they have got into stores. the physical connection is a critical issue. david: allen questrom, former jcpenney ceo, thank you for joining us. jonathan: let's get a bigger picture on retail. we want to bring in walter todd, greenwood capital associates. was an uglyining sector, shorted, and then the squeeze game.

-- came. retail, really ugly, heavily shorted, what is going to squeeze to wash the short out? have you seen any of that? walter: he saw a little that from macy's earnings. i think the holiday season good issue a further short squeeze. what if amazon were to go in and purchase kohl's? you could see a squeeze based on that. i think any of those factors could continue to move these heavily shorted and depressed names higher. our pick in retail is a mazonable sector retail, lowe's and home depot.

cosco would be another one with their membership model. that part of the investment strategy that you pick something that amazon cannot touch? is that something you think about? walter: absolutely. when you are analyzing the sector, you have to take that into account. another area we don't have a position in would be brands that have international exposure. armour not do so well with very little international exposure. those are differentiations in these sectors. you have to think about how amazon influences various parts of the sectors. david: thank you desktop jonathan: thank you. walter todd of greenwood capital associates. you can watch us online. just go to tv on your bloomberg terminal.

about 18 minutes into the session, three-day slide on the s&p 500. we close the first three-day slide since august. it has been that long. this is bloomberg. ♪

♪ jonathan: ge drops its dividend by 50%. shares are down 3% in the session. at the investor day here in new york city, a neutral rating on. great to have you on the program. whatever you learned so far? evolvingre into a much more focused company on health, life, and flight.

they will be divesting themselves of their oil servicing business. i have said for a long time they need a seismic shift. i was expecting them to cut their dividend. i believe that is the first step on the road to recovery so they can refocus their cash flow. they need to focus on their core businesses and focus their cash on acquisitions that increase their core businesses. jonathan: the cross-section this morning has been interesting. at one point it was ok in the premarket, and it lowered aggressively early on. i will not let the price set the conversation. you said ge needs a seismic shift. is that what you got? do you need more? we need more. it is going to take some time to turn around one of the world's

largest companies. if john flannery can turn this around, he could go down as one of the world's greatest ceos. i think he is smart, has energy, and is focused. i am liking what i hearing. jonathan: great to have you on the program. thank you. he has a tough job. his investor base does not have the patience of a jeff bezos over at amazon. they want to see growth and discipline on costs as well. on top of that, you look at the situation, and you have to remember moving a company like this is like maneuvering a supertanker times 100,000. david: completely right given the size of the company. it is an iconic u.s. company. it is then there over 100 years. that makes it doubly difficult because it has a certain brand that is hard to turn around. since the great depression, only one other time, that was 2009.

jonathan: very recent. david: exactly. we want to turn to the busy week ahead in washington. we have mike mckee. various events happening, let's start with text form. ike: of course, the thanksgiving holiday has compressed everything. the senate will markup their bill. they will make some adjustments. there are 355 amendments they are considering. the house rules committee on wednesday and has for vote on thursday, that is tentative. they hope they get through that by the end of the week. david: we will spend the week watching text form. central bankers over in europe. mike: the european central bank, we have janet yellen, mario draghi, and kuroda on the same panel on tuesday. a lot of people will be watching that for an indication on where rates are going. david: nafta, they are going to

get together again and try to get some movement going. mike: they meet in mexico city. they have made some progress, but not a lot. representative at the end of the fourth round in washington was very pessimistic and critical of his canadian and mexican negotiating partners. it will be interesting to see if they can bring themselves together. david: you have covered the next inside of this. you talk to people in the mexican government. what did the mexicans think they can do to get this moving? mike: they are going to stay at the table and make incremental progress bit by bit to keep the u.s. at the table rather than walk out. david: it will not get done this year, which is what wilbur ross initially predicted. he thought they were going to get it done. mike: there were a lot of things they thought they would get done by the end of the year, which brings us to taxes. jonathan: politics is difficult.

michael mckee, great to have you on the program. that wraps things up here at "bloomberg daybreak." the story of the equity market, a very slight, small, pick whatever you like, pullback. it is a three-day retreat. if we closer, it will be the first one since august 10. it has been that long since we had a pullback on the s&p 500. small pullback last week after eight straight weeks of gains. on the bond market, yields come in on a single basis point. the dollar unchanged against the euro. the pound is where the pain is today. from new york, this is bloomberg. ♪

andt is 10:00 in new york, 11:00 p.m. in hong kong. i'm julie hyman. mark: and i'm mark barton. welcome to

"bloomberg markets." ♪ julie: here are the top stories we are covering from the bloomberg and around the world. attacks are from debate enters a new phase in washington as the senate gets ready to start marking up its tax reform pledge. and we just learned from a tweet that president trump is nominated alex a czar -- alex azar as the new health and services secretary. sterling is falling as theresa may deals with infighting among her colleagues. icon generalal electric helps its new strategy to allow the company to fly high again. ge will be cutting the size of its board and dividends. so far, the shares are